Is Cintas Corporation (NASDAQ:CTAS) Worth US$665 Based On Its Intrinsic Value?
Is Cintas Corporation (NASDAQ:CTAS) Worth US$665 Based On Its Intrinsic Value?
Key Insights
- The projected fair value for Cintas is US$546 based on 2 Stage Free Cash Flow to Equity
- Current share price of US$665 suggests Cintas is potentially 22% overvalued
- The US$687 analyst price target for CTAS is 26% more than our estimate of fair value
How far off is Cintas Corporation (NASDAQ:CTAS) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
Step By Step Through The Calculation
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$1.46b | US$1.66b | US$1.88b | US$2.03b | US$2.29b | US$2.48b | US$2.63b | US$2.77b | US$2.88b | US$2.99b |
Growth Rate Estimate Source | Analyst x8 | Analyst x8 | Analyst x5 | Analyst x1 | Analyst x1 | Est @ 8.01% | Est @ 6.29% | Est @ 5.09% | Est @ 4.25% | Est @ 3.66% |
Present Value ($, Millions) Discounted @ 6.4% | US$1.4k | US$1.5k | US$1.6k | US$1.6k | US$1.7k | US$1.7k | US$1.7k | US$1.7k | US$1.6k | US$1.6k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$16b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.4%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$3.0b× (1 + 2.3%) ÷ (6.4%– 2.3%) = US$74b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$74b÷ ( 1 + 6.4%)10= US$39b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$55b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$665, the company appears slightly overvalued at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.
Important Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Cintas as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.4%, which is based on a levered beta of 0.904. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Cintas
- Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings and cashflows.
- Balance sheet summary for CTAS.
- Dividend is low compared to the top 25% of dividend payers in the Commercial Services market.
- Expensive based on P/E ratio and estimated fair value.
- Annual earnings are forecast to grow for the next 3 years.
- Annual earnings are forecast to grow slower than the American market.
- What else are analysts forecasting for CTAS?
Next Steps:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price exceeding the intrinsic value? For Cintas, we've compiled three essential aspects you should look at:
- Risks: To that end, you should be aware of the 1 warning sign we've spotted with Cintas .
- Future Earnings: How does CTAS's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
關鍵見解
- 根據兩階段股權自由現金流,Cintas的預計公允價值爲546美元
- 目前的665美元股價表明Cintas可能被高估了22%
- 分析師對CTAS的目標股價爲687美元,比我們對公允價值的估計高出26%
辛塔斯公司(納斯達克股票代碼:CTAS)距離其內在價值有多遠?我們將使用最新的財務數據,通過計算預期的未來現金流並將其折現爲現值,來研究股票的定價是否合理。實現這一目標的一種方法是使用折扣現金流(DCF)模型。像這樣的模型可能看起來超出外行人的理解,但它們很容易理解。
但請記住,估算公司價值的方法有很多,而差價合約只是一種方法。如果你對這種估值還有一些迫切的問題,可以看看 Simply Wall St 分析模型。
逐步進行計算
我們使用所謂的兩階段模型,這僅意味着公司的現金流有兩個不同的增長期。通常,第一階段是較高的增長階段,第二階段是較低的增長階段。首先,我們需要估計未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
通常,我們假設今天的一美元比未來一美元更有價值,因此我們需要對這些未來現金流的總和進行折價才能得出現值估計:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 14.6億美元 | 16.6 億美元 | 18.8 億美元 | 20.3 億美元 | 22.9 億美元 | 24.8 億美元 | 26.3 億美元 | 27.7 億美元 | 28.8 億美元 | 299 億美元 |
增長率估算來源 | 分析師 x8 | 分析師 x8 | 分析師 x5 | 分析師 x1 | 分析師 x1 | 估計 @ 8.01% | Est @ 6.29% | Est @ 5.09% | 東部時間 @ 4.25% | Est @ 3.66% |
現值 (美元, 百萬美元) 折扣 @ 6.4% | 140 萬美元 | 150 萬美元 | 160 萬美元 | 160 萬美元 | 17k 美元 | 17k 美元 | 17k 美元 | 17k 美元 | 160 萬美元 | 160 萬美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 160 億美元
在計算了最初10年期內未來現金流的現值之後,我們需要計算終值,該終值涵蓋了第一階段以後的所有未來現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們使用6.4%的股本成本將未來的現金流折現爲今天的價值。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 30億美元× (1 + 2.3%) ÷ (6.4% — 2.3%) = 740億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 740億美元÷ (1 + 6.4%)10= 390億美元
總價值是未來十年的現金流總額加上貼現的終端價值,由此得出總權益價值,在本例中爲550億美元。最後一步是將股票價值除以已發行股票的數量。與目前的665美元股價相比,該公司的估值在撰寫本文時似乎略有高估。任何計算中的假設都會對估值產生重大影響,因此最好將其視爲粗略的估計,而不是精確到最後一美分。
重要假設
現在,貼現現金流的最重要輸入是貼現率,當然還有實際現金流。投資的一部分是自己對公司未來業績的評估,因此請自己嘗試計算並檢查自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將Cintas視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了6.4%,這是基於0.904的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
Cintas 的 SWOT 分析
- 過去一年的收益增長超過了該行業。
- 收益和現金流足以彌補債務。
- CTAS 的資產負債表摘要。
- 與商業服務市場前25%的股息支付者相比,股息很低。
- 根據市盈率和估計的公允價值,價格昂貴。
- 預計未來三年的年收入將增長。
- 預計年收益的增長速度將低於美國市場。
- 分析師對CTAS還有什麼預測?
後續步驟:
儘管公司的估值很重要,但它不應該是你在研究公司時唯一考慮的指標。DCF模型並不是投資估值的萬能藥。相反,DCF模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。如果一家公司以不同的速度增長,或者其股本成本或無風險利率急劇變化,則產出可能會大不相同。股價超過內在價值的原因是什麼?對於Cintas,我們整理了你應該注意的三個基本方面:
- 風險:爲此,你應該注意我們在Cintas身上發現的1個警告信號。
- 未來收益:與同行和整個市場相比,CTAS的增長率如何?通過與我們的免費分析師增長預期圖表互動,深入了解未來幾年的分析師共識數字。
- 其他高質量的替代品:你喜歡一個優秀的全能選手嗎?瀏覽我們的高品質股票互動清單,了解您可能還會錯過什麼!
PS。Simply Wall St每天都會更新每隻美國股票的差價合約計算結果,因此,如果您想找到任何其他股票的內在價值,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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